Company Exceeds Top End of First Quarter Guidance and Raises Full Year Expectations
Great Wolf Resorts, Inc. (NASDAQ: WOLF), North America’s leading family of indoor waterpark resorts, reported results today for the first quarter ended March 31, 2010.
“Great Wolf Resorts delivered another quarter of solid operating results demonstrating the stability of our business through any cycle”
2010 Highlights
For the first quarter ended March 31, 2010, the Company reported a net loss of $(8.1) million, or $(0.26) per share, compared to a net loss $(5.6) million, or $(0.18) per diluted share for the same period a year earlier.
“Great Wolf Resorts delivered another quarter of solid operating results demonstrating the stability of our business through any cycle,” said Kim Schaefer, chief executive officer. “Our results show growth in each of our key operating metrics, further validating that families value the amenities, experience and quality that we offer as the only provider of regional drive-to destination resorts. We are encouraged by the early positive growth trends we are seeing early in 2010 in our group business that will complement our strong peak weekend and holiday periods. We also improved our financial flexibility by completing a first mortgage notes offering that addressed all of our 2011 debt maturities. With an improved balance sheet, a strong operating model and a capital light growth strategy, we believe that we will continue to innovate, grow and generate cash.”
Operating Results
Total revenues increased 13.4 percent to $70.7 million from $62.3 million in the first quarter of 2009, due to higher demand along with the impact of the timing of many schools’ spring break which fell primarily in the first quarter this year compared to the second quarter in 2009. Adjusted EBITDA in the quarter increased to $15.4 million from $15.1 million in the first quarter of 2009.
As a percentage of total revenue, adjusted EBITDA was 21.8 percent compared to 24.3 percent in the first quarter of 2009. The reduction in margin was driven primarily by an increase in selling, general and administrative (SG&A) costs year over year due to the ramp-up effect of the Company’s new resort in Concord, NC that opened in early 2009, along with the expansion of the Company’s Grapevine, TX resort completed during the first quarter of 2009.
Brand Results
Same store revenue per available room (RevPAR) in the first quarter of 2010 was up 4.3 percent (2.1 percent using constant dollars, which normalizes the foreign currency translation effect on operating statistics of the Company’s Canadian resort). Same-store occupancy was up 110 basis points. In the first quarter of 2010, approximately 87 percent of the Company’s system-wide room nights sold were to leisure guests. Same store average daily rate (ADR) increased 2.5 percent (0.4 percent decrease using constant dollars). Total same store revenue per occupied room (Total RevPOR), which includes revenue from rooms, food and beverage, and other amenities, increased 3.0 percent (1.0 percent using constant dollars).
Same store RevPAR for Great Wolf’s Generation II resorts, which are generally larger resorts that better represent the Company's current resort development model and contribute more than 80 percent of the Company’s Adjusted EBITDA, increased 5.0 percent (2.3 percent increase using constant dollars) versus 2009. Same store occupancy increased 220 basis points, with both group and leisure occupancy up slightly. Same store ADR increased 1.5 percent (1.2 percent decrease using constant dollars), while total RevPOR for Generation II resorts increased 2.2 percent (0.5 percent decrease using constant dollars).
The Company’s first quarter 2010 same store operating statistics do not reflect the results of the Concord, NC resort, which opened at the end of the first quarter of 2009.
Balance Sheet and Liquidity
On April 7, 2010, the Company’s subsidiaries, GWR Operating Partnership, L.L.L.P. and Great Wolf Finance Corp., completed an offering of $230 million aggregate principal amount of first mortgage notes. These notes were issued at a price to investors of 95.347 percent of their principal amount, bear a fixed interest rate of 10.875 percent per year and mature on April 1, 2017. The net proceeds from the offering were used to repay the outstanding mortgage debt on the Company’s Mason, OH, Williamsburg, VA and Grapevine, TX properties (all of which had maturity dates in 2011), totaling $212 million.
As of April 2010, the Company has no debt maturities until 2012 and no significant long-term capital commitments for construction or development of new properties. Over the near term, the Company intends to utilize the substantial portion of its free cash flow to manage its balance sheet leverage.
As of March 31, 2010, the Company had:
| Great Wolf Resorts, Inc. | ||||||||
| Condensed Consolidated Statements of Operations | ||||||||
| (Unaudited; dollars in thousands, except per share amounts) | ||||||||
| Three Months | Three Months | |||||||
| Ended | Ended | |||||||
| March 31, 2010 | March 31, 2009 | |||||||
| Revenues: | ||||||||
| Rooms | $ | 41,788 | $ | 36,345 | ||||
| Food and beverage | $ | 11,617 | $ | 9,902 | ||||
| Other hotel operations | $ | 10,208 | $ | 8,965 | ||||
| Management and other fees | $ | 1,655 | $ | 1,813 | ||||
| $ | 65,268 | $ | 57,025 | |||||
| Other revenue from managed properties | $ | 5,411 | $ | 5,282 | ||||
| Total revenues | $ | 70,679 | $ | 62,307 | ||||
| Operating expenses: | ||||||||
| Resort departmental expenses | $ | 22,923 | $ | 19,712 | ||||
| Selling, general and administrative | $ | 18,742 | $ | 14,644 | ||||
| Property operating costs | $ | 9,034 | $ | 7,970 | ||||
| Opening costs for resorts under development | $ | - | $ | 4,372 | ||||
| Depreciation and amortization | $ | 14,020 | $ | 12,586 | ||||
| Loss on disposition of property | $ | 10 | $ | 191 | ||||
| $ | 64,729 | $ | 59,475 | |||||
| Other expenses from managed properties | $ | 5,411 | $ | 5,282 | ||||
| Total operating expenses | $ | 70,140 | $ | 64,757 | ||||
| Operating income (loss) | $ | 539 | $ | (2,450 | ) | |||
| Investment income | $ | (289 | ) | $ | (384 | ) | ||
| Interest income | $ | (253 | ) | $ | (188 | ) | ||
| Interest expense | $ | 9,199 | $ | 6,267 | ||||
| Loss before equity in loss of unconsolidated affiliates and income taxes | $ | (8,118 | ) | $ | (8,145 | ) | ||
| Income tax expense (benefit) | $ | 180 | $ | (3,148 | ) | |||
| Equity in (income) loss of unconsolidated affiliates, net of tax | $ | (233 | ) | $ | 648 | |||
| Net loss | $ | (8,065 | ) | $ | (5,645 | ) | ||
| Net loss per share: | ||||||||
| Basic | $ | (0.26 | ) | $ | (0.18 | ) | ||
| Diluted | $ | (0.26 | ) | $ | (0.18 | ) | ||
| Weighted average common shares outstanding: | ||||||||
| Basic | 30,838 | 30,983 | ||||||
| Diluted | 30,838 | 30,983 | ||||||
| Great Wolf Resorts, Inc. | ||||||||
| Reconciliations of Non-GAAP Financial Measures | ||||||||
| (Unaudited; dollars in thousands, except per share amounts) | ||||||||
| Three Months | Three Months | |||||||
| Ended | Ended | |||||||
| March 31, 2010 | March 31, 2009 | |||||||
| Net loss | $ | (8,065 | ) | $ | (5,645 | ) | ||
| Adjustments: | ||||||||
| Opening costs for resorts under development | - | 4,372 | ||||||
| Non-cash employee and director compensation | 545 | 34 | ||||||
| Environmental liability costs | 35 | 32 | ||||||
| Depreciation and amortization | 14,020 | 12,586 | ||||||
| Loss on disposition of property | 10 | 191 | ||||||
| Interest expense, net | 8,946 | 6,079 | ||||||
| Income tax expense (benefit) | 180 | (3,148 | ) | |||||
| Equity in (income) loss of unconsolidated affiliates, net of tax | (233 | ) | 648 | |||||
| Adjusted EBITDA (1) | $ | 15,438 | $ | 15,149 | ||||
| Great Wolf Resorts, Inc. | |||||||
| Operating Statistics - Great Wolf Lodge Resorts | |||||||
| Three Months Ended March 31, |
|
||||||
| 2009 | 2008 | ||||||
| Great Wolf Lodge Brand Properties - All | |||||||
| Occupancy | 60.4% | 60.2% | |||||
| ADR | $ | 260.75 | $ | 255.19 | |||
| RevPAR | $ | 157.39 | $ | 153.58 | |||
| Total RevPOR | $ | 402.28 | $ | 391.89 | |||
| Total RevPAR | $ | 242.82 | $ | 235.85 | |||
| Great Wolf Lodge Brand Properties - Same Store (2) | |||||||
| Occupancy | 61.3% | 60.2% | |||||
| ADR | $ | 261.46 | $ | 255.19 | |||
| RevPAR | $ | 160.18 | $ | 153.58 | |||
| Total RevPOR | $ | 403.78 | $ | 391.89 | |||
| Total RevPAR | $ | 247.37 | $ | 235.85 | |||
| Great Wolf Lodge Brand Properties - Consolidated (3) | |||||||
| Occupancy | 59.4% | 60.0% | |||||
| ADR | $ | 274.74 | $ | 277.90 | |||
| RevPAR | $ | 163.25 | $ | 166.81 | |||
| Total RevPOR | $ | 416.30 | $ | 418.88 | |||
| Total RevPAR | $ | 247.36 | $ | 251.43 | |||
| Great Wolf Lodge Brand Properties - Consolidated - Same Store | |||||||
| Occupancy | 60.7% | 60.0% | |||||
| ADR | $ | 277.91 | $ | 277.90 | |||
| RevPAR | $ | 168.65 | $ | 166.81 | |||
| Total RevPOR | $ | 420.71 | $ | 418.88 | |||
| Total RevPAR | $ | 255.31 | $ | 251.43 | |||
| Great Wolf Lodge Brand - Generation I Resorts - Same Store (4) | |||||||
| Occupancy | 52.3% | 53.9% | |||||
| ADR | $ | 208.14 | $ | 199.63 | |||
| RevPAR | $ | 108.84 | $ | 107.61 | |||
| Total RevPOR | $ | 319.95 | $ | 305.37 | |||
| Total RevPAR | $ | 167.30 | $ | 164.61 | |||
| Great Wolf Lodge Brand - Generation II Resorts - Same Store (5) | |||||||
| Occupancy | 65.2% | 63.0% | |||||
| ADR | $ | 280.20 | $ | 276.14 | |||
| RevPAR | $ | 182.68 | $ | 173.97 | |||
| Total RevPOR | $ | 433.23 | $ | 424.10 | |||
| Total RevPAR | $ | 282.45 | $ | 267.18 | |||
| The company defines its operating statistics as follows: | |||||||
| Occupancy is calculated by dividing total occupied rooms by total available rooms. | |||||||
| Average daily rate (ADR) is the average daily room rate charged and is calculated by dividing total rooms revenue by total occupied rooms. | |||||||
| Revenue per available room (RevPAR) is the product of (a) occupancy and (b) ADR. | |||||||
| Total revenue per occupied room (Total RevPOR) is calculated by dividing total resort revenue (including revenue from rooms, food and beverage, and other amenities) by total occupied rooms. | |||||||
| Total revenue per available room (Total RevPAR) is the product of (a) occupancy and (b) Total RevPOR. | |||||||
| Great Wolf Resorts, Inc. | ||||||||
| Reconciliations of Outlook Financial Information (6) | ||||||||
| (in thousands, except per share amounts) | ||||||||
| Three Months | ||||||||
| Ending | Year Ending | |||||||
| June 30, | December 31, | |||||||
| 2010 | 2010 | |||||||
| Net loss | $ | (15,650 | ) | $ | (43,200 | ) | ||
| Adjustments: | ||||||||
| Non-cash employee compensation and professional fees | 500 | 2,100 | ||||||
| Depreciation and amortization | 14,300 | 57,500 | ||||||
| Interest expense, net | 12,900 | 46,300 | ||||||
| Equity in loss in unconsolidated affiliates | 100 | 100 | ||||||
| Environmental liability costs | - | 100 | ||||||
| Debt extinguishment costs | 3,500 | 3,500 | ||||||
| Income tax expense | 150 | 600 | ||||||
| Adjusted EBITDA (1) | $ | 15,800 | $ | 67,000 | ||||
| Net loss per share: | ||||||||
| Basic | $ | (0.50 | ) | $ | (1.39 | ) | ||
| Diluted | $ | (0.50 | ) | $ | (1.39 | ) | ||
| Weighted average shares outstanding: | ||||||||
| Basic | 31,000 | 31,000 | ||||||
| Diluted | 31,000 | 31,000 | ||||||
| (1) | See discussion of Adjusted EBITDA located in the "Non-GAAP Financial Measures" section of this press release. | |
| (2) | Same store properties comparison includes Great Wolf Lodge resorts that were open for the full periods in both 2010 and 2009. | |
| (3) | Consolidated properties comparison includes Great Wolf Lodge resorts that are consolidated for financial reporting purposes (that is, the company's Traverse City, Kansas City, Williamsburg, Pocono Mountains, Mason, Grapevine and Concord resorts). | |
| (4) | Generation I properties same store comparison includes only Great Wolf Lodge resorts of approximately 300 rooms or less that were open for all of both Q1 2010 and Q1 2009. | |
| (5) | Generation II properties same store comparison includes only Great Wolf Lodge resorts of approximately 400 rooms or more that were open for all of both Q1 2010 and Q1 2009. | |
| (6) | The company's outlook reconciliations use the mid-points of its estimates of Adjusted EBITDA. |
